Unlocking broadband for all . Broadband infrastructure sharing policies and strategies in emerging markets Appendix - April 2015 Private and confidential – not for publication Broadband infrastructure sharing policies and strategies in emerging markets April 2015 Contents Executive Summary Error! Bookmark not defined. 1 Introduction.................................................................................................................. Error! Bookmark not defined. 2 Analysis of Infrastructure Sharing Opportunities .................................................. Error! Bookmark not defined. 3 The Benefits of Infrastructure Sharing .................................................................... Error! Bookmark not defined. 4 Investment in shared infrastructure: competition and regulation issues........... Error! Bookmark not defined. 5 Best practice policies and strategies to incentivise sharing ............................... Error! Bookmark not defined. Appendix A African and South East Asian markets ............................................................................................. 2 Important Notice This report (the “Report”) has been prepared by Deloitte LLP (“Deloitte”) for The Association for Progressive Communications (“APC”) in accordance with the contract with them dated 29/07/2014 (“the Contract”) and on the basis of the scope and limitations set out below. The Report has been prepared solely for the purposes of examining the experience of infrastructure-sharing policies and strategies in emerging markets, as set out in the Contract. It should not be used for any other purpose or in any other context, and Deloitte accepts no responsibility for its use in either regard. The Report is provided exclusively for the APC’s use under the terms of the Contract. 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To the fullest extent possible, both Deloitte and APC disclaim any liability arising out of the use (or non- use) of the Report and its contents, including any action or decision taken as a result of such use (or non-use). © 2015 Deloitte LLP. 1 Broadband infrastructure sharing policies and strategies in emerging markets April 2015 Appendix A African and South East Asian markets This appendix provides more details on the development of the telecom market, on infrastructure sharing progress and regulations in ten countries in Africa and South East Asia. These are: Kenya, Nigeria, South Africa, Uganda, Côte d’Ivoire, Mozambique, India, Indonesia, Thailand and the Philippines. The research presented in this appendix was undertaken in Q3 2014. A.1 Kenya A.1.1 Market Summary With a mobile penetration rate of 76%, Kenya’s mobile market lies above the regional average (Tanzania 54%, Rwanda 54% and Uganda 51%). 1 In addition, mobile broadband connections have long overtaken fixed broadband connections (13.8m versus 0.08m). Kenya is also the global leader of mobile money transfers through M-PESA (70% of global m-money). 2Kenya’s telecom market statistics are summarised in Table 1 below and Table 2 provides an overview of the market players. Table 1: Kenya Market Statistics, 2014 Penetration (as a % of population) Population 44.6m Mobile Subscriptions (SIM cards) 34m 76% Internet Users 27m 61% Broadband Subscriptions, mobile 13.1m 29% Broadband Subscriptions, fixed 0.06m <0.1% International Submarine Cables 4 Source: Budde Report Kenya 2014, World Bank Table 2: Kenya Market Players, 2014 Mobile Operators 44 Safaricom B Yu Orange Safaricom AirtelBharti Airtel Yu (Essar Telecom Kenya) Orange Fixed Operator 1 Telkom Kenya (Orange) ISPs 10+ Including: Telkom Kenya Wananchi Liquid Telecom Access Kenya Jamii Telecom Source: Budde Report Kenya 2014 Kenya’s mobile communications sector has seen an increase in the number of players in recent years, currently hosting 4 MNOs. While 2008 saw the entry of a third and fourth MNO, Yu and Orange, in addition to Safaricom and Airtel, Safaricom remains the largest operator with over 65% of total market. After the entry of 1 GSMA 2 http://www.gsma.com/mobilefordevelopment/insights-on-the-economics-of-mobile-money-m-pesa-key-revenue-driver-for- safaricom © 2015 Deloitte LLP. 2 Broadband infrastructure sharing policies and strategies in emerging markets April 2015 two smaller operators, the mobile market experienced reductions in the average price per minute (down by 21.9%) and an increase in unique subscribers by 2m.3 Figure 1: Kenya Mobile Market Shares, 2014 7% 9% Safaricom Bharti Airtel 16% Yu Orange 68% Source: GSMA Telkom Kenya was privatised in 2007 and is now partly owned by Orange and by the Kenyan government. The company is the sole provider of fixed-line telephone services in Kenya. Due to the steady increase in demand for mobile services, the total number of fixed lines in service has decreased from 328,000 in 2003 to 57,000 in 2013. 4 Telkom Kenya also provides fixed broadband services. Kenya has over 10 ISPs; however each of these fixed broadband providers has a market share of less than 1% of the total broadband market. A.1.2 Fibre Infrastructure In addition to the existing mobile and fixed networks, the national fibre backbone in Kenya is being built up through a combination of government initiatives and private sector investments, which are described below: National Optic Fibre Backbone Infrastructure (NOFBI): • Phase 1 involved a roll out 4,300km of fibre and was completed in 2012. • Phase 2 commenced in July 2014 and is expected to connect all 47 country governments through an additional 1,600km of fibre. 5 The project, which is being funded through a Chinese concessional loan of 6bn KES, is expected to be completed in 2016. 6 Private Sector Networks: • To compete with Telkom Kenya, several major ISPs and MNOs have also been rolling out their own networks. By 2012, JamiiTelcom had around 4,000km and Safaricom around 600km of optic fibre links, with more in planning. 7 • The Kenya Power and Lighting Company (KPLC), a major electricity distributor, is rolling out a fibre network along its power lines. As KPLC only needs around a quarter of the capacity for its own operations, the company has gained a licence in 2010 allowing it to sell fibre capacity to third parties. 3 GSMA 4 Kenya – Telecoms, Mobile, Broadband and Forecasts, 13 th Edition, Buddecomm Report 5http://www.cio.co.ke/news/top-stories/phase-two-of-nofbi-to-commence-in-july 6http://china.aiddata.org/projects/30384 7 Kenya – Telecoms, Mobile, Broadband and Forecasts, 13 th Edition, Buddecomm Report © 2015 Deloitte LLP. 3 Broadband infrastructure sharing policies and strategies in emerging markets April 2015 International Terrestrial Fibre Links: In addition to the national fibre backbone, Kenya is also connected to many of its neighbouring countries through terrestrial international fibre links: • The Eastern Africa Backhaul System is a Joint Venture among national operators and involves a 4,000km fibre backbone, connecting Kenya, Uganda, Tanzania, Burundi and Rwanda. • As part of a project, linking the countries’ electricity grids, Kenya has established fibre connections with Tanzania and Zambia. A.1.3 Infrastructure Sharing Regulations In 2009 the regulator, the Competition Authority of Kenya (CAK) (formerly known as the Communications Commission of Kenya, CCK) developed the “Code of Practice for the Deployment of Communication Infrastructure”. 8 The code applies to all forms of passive communication infrastructure including towers, masts, ducts and overhead, underground and submarine cables. 9 Concerning site sharing and co-location the code gives the following provisions: • Site Sharing is to be pursued as the first option by telecom operators. The commercial terms have to be mutually agreed upon and agreements are to be done on a first come first serve basis (4.5.1). • An operator who declines a request for site-sharing has to give reasons in writing to the requesting operator and the administrator of the code (4.5.4). A complaint can be filed by the requesting operator (4.5.5). The code further provides guidance on the sharing of duct and cable infrastructure: • Operators must share ducts and cables whenever technically possible (4.10.1). • Sharing of cable infrastructure is contingent on the availability